عدم تقارن گزینه ضمنی در انتظارات بازار اوراق قرضه در سراسر اقدامات سیاست های پولی بانک مرکزی اروپا

This paper examines the behaviour of option-implied asymmetries in bond market expectations around monetary policy actions of the European Central Bank. The results indicate that market expectations are systematically asymmetric around monetary policy actions. Around policy tightening, market participants attach higher probabilities for sharp yield increases than for sharp decreases. Correspondingly, around loosening of the policy, markets assign higher probabilities for sharp yield decreases than for increases. Furthermore, the results demonstrate that market expectations are significantly altered around monetary policy actions, as asymmetries in market expectations tend to increase before changes in the monetary policy stance, and to decrease afterwards.

Considerable advances in extracting market expectations from financial-asset prices have occurred during the last 10 years (see Söderlind & Svensson, 1997 for a survey). Traditionally, market expectations of future interest rates, for instance, have been extracted from the term structure of interest rates or from futures contracts on money-market instruments and bonds. A severe limitation of these measures is that they reflect only central expectations, and hence provide no indication about the dispersion of market expectations. Consequently, the focus has recently started to shift to information contained in option prices. Volatility implied by option prices is now widely considered to be a useful forward-looking measure of market uncertainty, and is therefore used extensively among market participants and central banks to assess the uncertainty surrounding central expectations. Option prices, however, may reveal considerable information beyond implied volatility. For instance, a call option has a positive payoff only if the price of the underlying asset at the maturity of the option exceeds the strike price of the option. The call option price should therefore reflect market expectations about the probability of the underlying asset price exceeding the strike price of the option. Hence, a set of option prices with the same maturity but with different strike prices can be used to extract the entire probability distribution of the underlying asset price at the maturity of the option. Option-implied probability distributions have gained a lot of attention over recent years. Central banks, in particular, are now increasingly using option-implied distributions to evaluate market expectations of future interest rates and exchange rates, and using these expectations as complementary information for the purposes of formulating monetary policy.1 Several alternative methods for extracting probability distributions from option prices have been proposed in the literature. These methods can be broadly classified as parametric (e.g., Corrado and Su, 1996; Melick & Thomas, 1997) and nonparametric (e.g., Jackwerth & Rubinstein, 1996; Shimko, 1993) methods. Reviews of different techniques are provided in Bahra (1997), Jackwerth (1999), and Bliss and Panigirtzoglou (2002), while Campa, Chang, and Reider (1998) and Jondau and Rockinger (2000) provide comparisons of alternative methods. A number of papers have used option-implied probability distributions to examine the behaviour of market expectations around specific events, such as macroeconomic news announcements (e.g., Beber & Brandt, 2003), financial crises (e.g., Gemmill & Saflekos, 2000; Melick & Thomas, 1997; Söderlind, 2000), elections (e.g., Coutant, Jondau, & Rockinger, 2001; Gemmill & Saflekos, 2000), and central bank interventions (e.g., Cooper & Talbot, 1999; Galati & Melick, 2002). These studies show that option-implied distributions are useful for assessing market expectations around economic events.2 Moreover, implied distributions can be used to gauge changes in market expectations and, additionally, to reveal possible asymmetries in expectations. This paper uses data on German government bond futures options to examine the behaviour of market expectations around monetary policy actions of the European Central Bank (ECB). In particular, this paper focuses on the asymmetries in bond market expectations, as measured by the skewness of option-implied probability distributions of future bond yields. By analysing the asymmetries in bond market expectations, this paper provides new evidence on how monetary policy affects financial markets. The existing literature on the impact of monetary policy on financial markets is extensive. Several papers document that monetary policy actions of central banks systematically affect money-market interest rates, bond yields, and stock prices (see e.g., Bomfim, 2003; Gasbarro & Monroe, 2004; Kuttner, 2001 and Lee, 2002; Neumann & Wiedmann, 1998).3Söderlind (2003) demonstrates that monetary policy objectives may affect the pricing of bond options, while Jensen, Mercer, and Johnson (1996), Patelis (1997), Thorbecke (1997), and Johnson, Buetow, Jensen, and Reilly (2003) show that the monetary policy stance significantly affects stock and bond returns. Option-implied probability distributions and monetary policy decisions have previously been combined in Bhar and Chiarella (2000) and Mandler, 2002 and Mandler, 2003. Bhar and Chiarella (2000) investigate the behaviour of option-implied distributions of short-term interest rates around four interest rate reductions conducted by the Reserve Bank of Australia. They find that the probability of a decline in interest rates increases before the actual central bank rate reductions, suggesting that market participants anticipate the forthcoming interest rate cut. Mandler (2002) examines the behaviour of option-implied short-term interest rate distributions around two monetary policy tightenings conducted by the ECB, and finds that the dispersion of the implied distribution decreases after the policy action, while the higher-order moments seem virtually unaffected. Mandler (2003) focuses on the impact of the ECB's monetary policy meetings on implied distributions of short-term interest rates. He shows that the monetary policy meetings of the ECB tend to decrease the uncertainty in market expectations.4 This paper differs from Bhar and Chiarella (2000) and Mandler, 2002 and Mandler, 2003 in several respects. First, the focus in this paper is on the option-implied asymmetries in bond market expectations, whereas Bhar and Chiarella (2000) and Mandler, 2002 and Mandler, 2003 analyse the general behaviour of implied distributions of short-term money-market rates. Second, while Bhar and Chiarella (2000) and Mandler (2002) conduct case studies around only a few policy actions, this paper provides a more systematic investigation by using a longer data period, which includes 14 monetary policy shifts. Third, Mandler (2003) investigates the impact of monetary policy meetings, regardless of whether the monetary policy stance is actually changed or not, on option-implied probability distributions. This paper differs from Mandler (2003) by focusing solely on the impact of monetary policy actions. Finally, Bhar and Chiarella (2000) and Mandler (2003) use nonparametric volatility smile smoothing techniques (à la Shimko, 1993) to estimate the option-implied distributions. In this paper, option-implied probability distributions are extracted based on a parametric approach, which assumes that the distribution of the underlying asset price at the maturity of the option is a mixture of two lognormal distributions. This approach may be considered theoretically more competent as it ensures proper behaviour of the tail probabilities.5 This paper contributes to the literature on the impact of monetary policy actions on financial markets by focusing on the asymmetries in bond market expectations as reflected in option-implied probability distributions of future bond yields. It is hypothesized here that market expectations are systematically asymmetric around changes in the monetary policy stance. The reasoning for this is the essentially asymmetric action set of the central bank. During restrictive monetary policy periods, market participants know that the reference interest rates are either increased or kept unchanged in a given monetary policy meeting. Similarly, in an expansive monetary policy environment, market participants know that the central bank will either reduce the interest rates or keep them unchanged. In addition, given that the market participants tend to anticipate the timing of monetary policy actions (e.g., Perez-Quiros & Sicilia, 2002), but not necessarily the exact impact of the action on asset prices,6 market expectations are likely to be prominently (asymmetrically) dispersed. Therefore, it is expected that around monetary policy tightening, option-implied yield distributions are positively skewed, indicating that market participants attach higher probabilities for sharp yield increases than for sharp decreases. Similarly, implied yield distributions are expected to be negatively skewed around loosening of the policy, implying that markets assign higher probabilities for sharp yield decreases than for increases. The remainder of this paper is organized as follows. Section 2 describes the bond futures options data used in the empirical analysis. Section 3 presents the methodology applied to extract asymmetries in bond market expectations from option prices. Section 4 reports the empirical findings on the behaviour of asymmetries in bond market expectations around monetary policy actions of the ECB. Finally, Section 5 offers concluding remarks.

This paper contributes to the literature on the impact of monetary policy actions on financial markets by focusing on the asymmetries in bond market expectations around monetary policy actions of the European Central Bank. The asymmetries in market expectations are measured by the skewness of option-implied probability distributions of future bond yields. In order to assess the asymmetries in market expectations, implied probability distributions are extracted from German government bond futures options under the assumption that the distribution of the underlying asset price is a mixture of lognormal distributions. This approach allows for arbitrary skewness in the option-implied distribution, and therefore, provides a suitable framework for assessing possible asymmetries in market expectations. The results of this analysis suggest that market expectations are systematically asymmetric around monetary policy actions of the ECB. Around monetary policy tightening, option-implied yield distributions are positively skewed, indicating that market participants attach higher probabilities for sharp yield increases than for sharp decreases. Correspondingly, around loosening of the policy, implied yield distributions are negatively skewed, suggesting that markets assign higher probabilities for sharp yield decreases than for increases. These results are reasonable, given the essentially asymmetric action set of the central bank during expansive and restrictive monetary policy periods. Furthermore, the results of this paper indicate that market expectations are significantly altered around monetary policy actions of the ECB. The analysis demonstrates that the asymmetries in market expectations tend to increase before changes in the monetary policy stance, and to decrease afterwards. This suggests that market participants are inclined to anticipate monetary policy shifts. Finally, the results indicate that asymmetries in bond market expectations may be utilised in predicting monetary policy actions of the ECB. In general, the results of this paper demonstrate that option-implied asymmetries can provide useful insight into market expectations. These results may be of interest, for instance, to central banks, as the assessment of possible asymmetries in market expectations may provide useful complementary information for the purposes of formulating monetary policy and, additionally, for assessing the timing of monetary policy actions.